Court Opinion

ID: 4421155
Source: CourtListenerOpinion
Date Created: 2019-07-30 15:04:10.667258+00
Date Added: 2024-06-11T07:49:59.553509
License: Public Domain

FILED
                                                                    Jul 30 2019, 5:52 am

                                                                         CLERK
                                                                     Indiana Supreme Court
                                                                        Court of Appeals
                                                                          and Tax Court

ATTORNEYS FOR APPELLANT                                     ATTORNEY FOR APPELLEE
Greg A. Bouwer                                              XL INVESTMENT PROPERTIES,
Jeff Carroll                                                LLC
Koransky Bouwer & Poracky, P.C.                             Matthew J. Hagenow
Dyer, Indiana                                               Newby, Lewis, Kaminski & Jones,
                                                            LLP
                                                            LaPorte, Indiana
                                                            ATTORNEY FOR APPELLEE
                                                            LAPORTE COUNTY AUDITOR
                                                            J. Alex Bruggenschmidt
                                                            Buchanan & Bruggenschmidt,
                                                            P.C.
                                                            Zionsville, Indiana

                                             IN THE
     COURT OF APPEALS OF INDIANA

Indiana Land Trust Company,                                 July 30, 2019
f/k/a Lake County Trust                                     Court of Appeals Case No.
Company TR #4340,                                           18A-MI-2150
Appellant-Movant,                                           Appeal from the LaPorte Superior
                                                            Court
        v.
                                                            The Honorable Richard R.
XL Investment Properties, LLC,                              Stalbrink, Jr., Judge
and LaPorte County Auditor,                                 Trial Court Cause No.
Appellees-Respondents                                       46D02-1509-MI-1642

Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019                            Page 1 of 15
      Baker, Judge.

[1]   Indiana Land Trust Company, f/k/a Lake County Trust Company TR #4340

      (Trust 4340), appeals the judgment of the trial court denying its motion to set

      aside a tax deed and quiet title judgment issued to XL Investment Properties,

      LLC (XL Investment). Trust 4340 argues that the trial court erroneously

      determined that the motion to set aside was untimely filed and the tax sale

      notice process employed by the LaPorte County Auditor (the Auditor) was

      statutorily and constitutionally insufficient. Finding that the motion to set aside

      was not untimely and that the notice process was constitutionally insufficient,

      we reverse and remand for further proceedings.

                                                        Facts      1

[2]   Peter Dellaportas is a decades-long real estate developer who owns many

      investment properties. At some point in the past, Dellaportas purchased a 140-

      acre property, which used to be a municipal airport, in Michigan City. The

      property has since been subdivided into multiple parcels, some of which have

      been developed for commercial use.

[3]   Dellaportas’s company, located in Chicago, is called Midwest Investment. In

      June 1993, Dellaportas put one of the undeveloped parcels, totaling

      approximately thirty acres (the Property) into a trust, Trust 4340, with either

      1
          We held oral argument in Indianapolis on July 2, 2019.

      Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019        Page 2 of 15
      himself or Midwest Investment as the beneficiary. Lake County Trust

      Company (the Trust Company) was the entity that helped him process and

      finalize the trust.

[4]   The deed directed that property tax bills for the Property should be sent to

      Midwest Investment at 415 North LaSalle Street, Suite 700, in Chicago. In

      1994, Midwest Investment relocated to Suite 200 in the same building and

      remained there for approximately ten2 years. In 2014, Midwest Investment

      moved to 432 North Clark Street, Suite 304, in Chicago. Midwest Investment

      did not update the Auditor with its changes of address.

[5]   Midwest Investment paid the property taxes on the Property from 1993 through

      2008 but failed to pay any property taxes from 2009 through 2015. In 2015,

      LaPorte County (the County) determined that the Property’s outstanding tax

      liability totaled $230,017.26.

[6]   The County held a tax sale in 2015 (the Tax Sale); the certified Tax Sale list

      included the Property. The County engaged SRI, Inc. (SRI), a local

      government contractor, to assist with various aspects of the tax sale process,

      including the mailing of thousands of tax notices. The Work Plan Agreement

      entered into between the County and SRI stated that the parties (including SRI,

      the Auditor, and the Treasurer) would “individually or collectively perform or

      2
       Dellaportas testified that Midwest Investment remained in Suite 200 for ten years, but the next change of
      address he mentioned occurred in 2014. Tr. Vol. II p. 25, 27.

      Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019                                Page 3 of 15
      cause to be performed by employees of their organization the actions defined

      herein which are required to execute the County Tax Sale in compliance with

      Ind. Code 6-1.1-24 and Ind. Code 6-1.1-25.” Tr. Ex. 21. The Work Plan

      Agreement also stated that “the Auditor agrees to search its internal records for

      a better address for the owner(s) of properties for which the certified mail

      notices are returned and provide the results of said searches to SRI . . . .” Id.

[7]   In 2015, the General Assembly amended Indiana Code section 6-1.1-24-4.

      Following that amendment, the Auditor believed it no longer had an obligation

      to search for a better address if certified mail notices were returned as

      undeliverable.

[8]   On July 31, 2015, SRI prepared the notice of the tax sale of the Property and

      sent it by certified mail (the Certified Mail Notice) to Trust 4340 at Suite 700 on

      North LaSalle Drive. The Certified Mail Notice did not contain a street

      address or common description of the Property. The Certified Mail Notice was

      returned, stamped “Return to Sender, Not Deliverable as Addressed, Unable to

      Forward,” and bore a handwritten note stating “refused.” Tr. Ex. 24. The

      notice was also mailed to the same address on the same date by regular, first-

      class mail (the First Class Notice). The First Class Notice was not returned.

[9]   SRI generated a “returned mail to search” list for all entities that were sent

      notices of the Tax Sale; the list included Trust 4340. In August 2015, SRI

      performed an additional search for addresses of those entities, but evidently was

      unable to find the current address for Trust 4340 and/or Midwest Investment.

      Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019           Page 4 of 15
[10]   On August 7, 2015, the address for tax notices for Trust 4340 and the adjacent

       parcel was changed in the LaPorte County system used by the Auditor and

       assessor. Beginning on that date, the system listed the correct, current address

       on North Clark Street.

[11]   The Auditor did not undertake any effort to find current addresses for property

       owners whose certified mail was returned as undeliverable. Although SRI

       posted to its website if first class or certified mail was returned, no one from the

       Auditor’s office ever checked that website to determine if mail had been

       returned. There was never a point in the process when the Auditor looked for

       returned mail or took any action related to it. Indeed, employees of the Auditor

       readily admitted they took no action:

           • “Q: Did you search your internal records for this parcel, to your
             knowledge? A: I just answered that. We did not because the first-class
             mail was not returned. Shall I say it slower?” Tr. Vol. II p. 71.

           • “Q: You didn’t have to do anything[?] A: No. Q: So you didn’t make
             any type of determination on whether or not to search for another
             address? A: No, we did not. We didn’t search for anything. Q: So you
             could [not] have cared less if the notices were returned[?] A: That’s
             right.” Appellant’s App. Vol. III p. 59.

       The Auditor published notice of the Tax Sale in the local newspaper three times

       before the Tax Sale.

[12]   Dellaportas and Midwest Investment remained unaware of the Tax Sale. In

       October 2015, the Tax Sale took place, but the Property did not sell. Therefore,

       the County placed it for sale at a Live Certificate Sale in February 2016. The

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019          Page 5 of 15
       County published notice of the Live Certificate Sale. XL Investment purchased

       the Property for $155,000. XL Investment filed a petition for a tax deed for the

       Property. The trial court entered an order issuing the deed on August 30, 2016.

       The deed was signed on September 30 and recorded on October 4, 2016. At

       some point, XL Investment filed a quiet title action, which finally resulted in

       notice to Trust 4340 on December 9, 2016.

[13]   On March 9, 2017, Trust 4340 moved to set aside the judgment and tax deed.

       A bench trial took place on April 13, 2018, and on August 9, 2018, the trial

       court denied Trust 4340’s motion. In pertinent part, the trial court found as

       follows:

               44.      [The Notice] was sent by first class mail and certified mail
                        to the owner of record at the last address of record. The
                        first class mailing was not returned, leaving the Auditor
                        under no obligation to take additional steps to notify the
                        property owner.

                                                          ***

               46.      Per statute, the owner of the Property was to notify the
                        County of a change in address and did not.

                                                          ***

               48.      The Court finds that although the Tax Sale notice did not
                        include the property address or other description of the
                        property, the Auditor and SRI still substantially complied
                        with Indiana Code § 6-1.1-24-4 by providing the pin
                        number and legal description and could not provide any

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019               Page 6 of 15
                 address or other description because the property was
                 vacant.

                                                   ***

        77.      Due process does not require that a property owner receive
                 actual notice before the government may take his property.
                 Rather, we have stated that due process requires the
                 government to provide “notice reasonably calculated,
                 under all the circumstances, to apprise interested parties of
                 the pendency of the action and afford them an opportunity
                 to present their objections.” Jones v. Flowers, 547 U.S. 220
                 (2006).

        78.      When mailed 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 his
                 property, if it is practicable to do so. Id.

        79.      . . . In the present case, the Auditor sent two mailings, one
                 via first class mail and one via certified mail. Although the
                 certified mail was returned, the first class mailing was not
                 returned.

        80.      The Court in Jones held that when a mailing is returned
                 unclaimed, additional steps must be taken to provide
                 notice. Id. The County in the present case took that
                 additional step when they sent two mailings through two
                 different methods. They also went a step further and
                 published notice of the pending Tax Sale three times in the
                 local paper.

                                                   ***

Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019             Page 7 of 15
               84.      Therefore, the County’s efforts to notice the Trust prior to
                        the tax sale were reasonably calculated to appraise [sic]
                        Trust 4340 of the tax sale proceedings against the property
                        and it was reasonably certain that the first class mailing
                        informed those affected because it was never returned.

                                                          ***

               90.      The Court finds that the Trust did not file its petition for
                        relief within a reasonable amount of time for the following
                        reasons:

                        1.       The Trust did not pay real estate taxes on the
                                 Property for eight (8) years.

                        2.       The Trust acquired the property in 1993. Despite
                                 multiple moves over several years, the Auditor was
                                 never provided with an updated address by the
                                 Trust.

                                                          ***

                        4.       Peter Dellaportas testified to be an experienced real
                                 estate developer who knew or should have known
                                 that real estate taxes are due each year and the
                                 subsequent consequences for not paying them.

       Appealed Order p. 8-16. Trust 4340 now appeals.

                                      Discussion and Decision
[14]   Trust 4340 raises multiple arguments on appeal, which we reframe and restate

       as follows: (1) the trial court erroneously determined that Trust 4340’s motion

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019                 Page 8 of 15
       to set aside the tax deed and judgment was untimely filed; and (2) the trial court

       erroneously determined that the notice was sufficient under statutory and

       constitutional law and under the Work Plan Agreement.

                                                I. Timeliness
[15]   As noted above, the trial court found that Trust 4340's petition to set aside was

       untimely filed. It based this conclusion on several factors: (1) Trust 4340 did

       not pay real estate taxes on the Property for eight years; (2) Trust 4340 did not

       update the Auditor on its address changes; (3) XL Investment took the extra

       step of publishing notice of the tax proceedings in a local newspaper; and

       (3) Dellaportas is an experienced real estate developer who knew or should

       have known about the consequences of failing to pay property taxes on

       time. Trust 4340 maintains that these are improper reasons to find that its

       petition was untimely filed.

[16]   As a general rule, a property owner may not contest a tax deed if more than

       sixty days have passed since the trial court entered its order issuing the

       deed. Ind. Code § 6-1.1-25-4.6(l). There is a due process exception extending

       this period to a “reasonable time,” which will vary with the circumstances of

       each case. Edwards v. Neace, 898 N.E.2d 343, 347-48 (Ind. Ct. App. 2008)

       (noting that delays in excess of one year can be reasonable depending on the

       circumstances).

[17]   Here, XL Investment served Trust 4340 with the summons and complaint in a

       quiet title action on December 9, 2016. It is undisputed that this was the first

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019            Page 9 of 15
       notice of the tax proceedings that Trust 4340 actually received. It filed its

       motion to set aside on March 9, 2017, exactly three months later (over six

       months after August 30, 2016, when the trial court ordered the Auditor to issue

       a tax deed to XL Investment).

[18]   The trial court’s rationale for finding the motion untimely filed primarily

       focuses on the length of tax delinquency, as well as Trust 4340’s actions, before

       the tax sale, rather than the period of time that elapsed after the tax deed was

       issued. There is no caselaw supporting this analysis. By their very nature, tax

       sales always occur after a period of tax delinquency, often a lengthy

       one. Therefore, if trial courts could focus on the period of delinquency as

       opposed to the period of time elapsed after the tax sale occurred, there would be

       no point in the “reasonable time” exception.

[19]   We find that under the circumstances of this case, a delay of six months after

       the trial court ordered the Auditor to issue a tax deed—which was only three

       months after Trust 4340 first received notice of the proceedings—was

       reasonable. Therefore, the trial court erred by finding the motion to set aside

       untimely filed.

                                        II. Notice of Tax Sale
[20]   Before the legislature amended Indiana Code section 6-1.1-24-4 in 2015, it was

       well established that due process required county auditors to search their own

       records. E.g., City of Elkhart v. SFS, LLC, 968 N.E.2d 812, 817 (Ind. Ct. App.

       2012) (noting that due process “requires the county auditor to search the

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019        Page 10 of 15
       records that it maintains” in its office); Hullett v. LaFevre, 926 N.E.2d 524, 528

       (Ind. Ct. App. 2010) (same); Edwards, 898 N.E.2d at 349 (same); Reeder Assocs.

       II v. Chicago Belle, Ltd., 778 N.E.2d 828, 834 (Ind. Ct. App. 2002) (same).3 This

       caselaw does not condition the records search on other events, nor does it deem

       it a factor in a totality of the circumstances type of determination as to whether

       proper tax sale notice has been provided. Instead, it is black and white: an

       auditor is charged with knowledge of the contents of its records and is

       constitutionally obligated to search those records.

[21]   It is axiomatic that the General Assembly may not legislate away constitutional

       due process protections. See Flanner House of Indianapolis, Inc. v. Flanner House

       Elem. Sch., Inc., 88 N.E.3d 242, 252 (Ind. Ct. App. 2017) (noting that legislative

       actions “must not interfere with constitutional rights”); cf. State v. Rendleman,

       603 N.E.2d 1333, 1336 (Ind. 1992) (noting that the legislature may modify or

       abrogate common law rights “so long as such change does not interfere with

       constitutional rights”). Indeed, the purpose of Indiana Code section 6-1.1-24-4

       is “to codify the applicable due process protections and instruct the auditor on

       how to provide constitutionally sufficient notice.” Farmer Mut. Ins. Co. v. M

       3
         The Auditor argues that the United States Supreme Court upended years of Indiana caselaw when it
       decided Jones v. Flowers, 547 U.S. 220, 229 (2006). But in the years following Jones, Indiana courts have
       continued to enforce unequivocally an auditor’s constitutional obligations to be aware of and search its own
       records. See City of Elkhart, 968 N.E.2d at 817; Hullett, 926 N.E.2d at 528; Edwards, 898 N.E.2d at 349; see
       also Marion Cty. Auditor v. Sawmill Creek, LLC, 964 N.E.2d 213, 218-20 (Ind. 2012) (noting that Jones informed,
       but did not alter, the long-standing due process protections put in place by Mullane v. Cent. Hanover Bank &
       Trust Co., 339 U.S. 306 (1950)).

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019                                Page 11 of 15
       Jewell, LLC, 992 N.E.2d 751, 759 (Ind. Ct. App. 2013).4 Therefore, “to interpret

       the statute in a manner that conflicts with or provides less protection than the

       Due Process Clause would frustrate its clear legislative purpose.” Id. In fact, in

       this case, the Work Plan Agreement between SRI and the Auditor required the

       Auditor to search its own records for a better address for the owners of the

       properties for which certified mail notices were returned—a provision that SRI

       believed was intended to ensure that the tax sale notices complied with due

       process. Tr. Vol. II p. 113.

[22]   Therefore, regardless of the language of Indiana Code section 6-1.1-24-4, the

       Auditor is charged with knowledge of the contents of its records and is

       constitutionally obligated to search those records. Here, it is undisputed that it

       did not do so.

[23]   The attempts the Auditor made to locate Trust 4340 were constitutionally

       insufficient. First, the Auditor published notice of the sale in a local newspaper,

       but notice by publication is looked on with extreme disfavor in a tax sale

       situation. Jones, 547 U.S. at 237-38 (noting that publication is adequate only

       where it is not reasonably possible or even practicable to give more adequate

       warning). Second, the Auditor, through SRI, conducted an additional search

       after the certified mailing was returned as undeliverable. But a search of other

       4
        The Auditor directs our attention to Badawi v. Orth for the proposition that tax sale notices comport with
       due process requirements if they are sent in accordance with relevant statutes. 955 N.E.2d 849, 853-54 (Ind.
       Ct. App. 2011). But Badawi concerns statutory due process rather than constitutional due process—a key
       distinction that renders Badawi inapposite.

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019                               Page 12 of 15
       records and databases does not comport with due process where the Auditor

       failed to search its own records first. See Reeder Assocs. II, 778 N.E.2d at 835

       (holding that while “a county auditor may go beyond the minimum

       requirements of due process and engage in a search of outside records, it may

       not do so in lieu of a search of its own record”).

[24]   Third, the fact that the Auditor mailed a notice by first class mail (which was

       not returned) in addition to certified mail is not enough to satisfy due process

       given that the certified mail attempts were returned as undeliverable. Our

       appellate courts have distinguished between different ways in which certified

       mail is returned. If it is returned as “unclaimed and unable to be forwarded,”

       the auditor satisfies due process when it also sent the notice via first class mail

       and took other reasonable steps to attempt to notify the property owner. Floor

       Essence, LLC v. Marion Cty. Auditor, 14 N.E.3d 883, 885 (Ind. Ct. App. 2014). If,

       on the other hand, it is returned and stamped “not deliverable as addressed,

       unable to forward,” as it was in this case, then “re-mailing the notice by first

       class [is] unreasonable.” Marion Cty. Auditor v. Sawmill Creek, LLC, 964 N.E.2d

       213, 220 (Ind. 2012); see also M&M Inv. Group, LLC v. Ahlemeyer Farms, Inc., 994

       N.E.2d 1108, 1117 (Ind. 2013) (affirming Sawmill reasoning).

[25]   It is true that here, in addition to being stamped as undeliverable and unable to

       forward, the first certified mail attempt was returned bearing the word

       “refused” in handwriting. Not only is there no indication of who wrote it or

       who “refused” it, the official Post Office stamp indicates that the mail was not

       deliverable. Given such a conflict and our preference for erring on the side of

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019          Page 13 of 15
       due process protections, we believe that the official Post Office stamp and label

       must control. Here, the Post Office deemed the notice to be not deliverable as

       addressed and unable to forward; therefore, the act of sending the notice via

       first class mail was insufficient to comply with constitutional due process.

[26]   It has long been settled in Indiana that to comply with due process in tax sale

       proceedings, county auditors are charged with the knowledge of their own

       records and are required to search those records.5 The General Assembly does

       not have the authority to codify away constitutional protections. Therefore,

       despite the language of Indiana Code section 6-1.1-24-4, the Auditor was

       required to search its records for a better address for Trust 4340 after the

       certified mail notice was returned as not deliverable. 6 Under these

       circumstances, the trial court erred by denying Trust 4340’s motion to set aside

       the tax deed and quiet title judgment. Consequently, we reverse and remand. 7

       5
         We note that in this day and age of digitized records, this is not a monumental task. The unchallenged
       testimony provides that after August 7, 2015, the Auditor would have been able to locate the correct address
       for Trust 4340 in its internal, searchable “Low” system. Tr. Vol. II p. 115; Tr. Ex. 8. And in any event,
       courts of this State have rejected an argument that such a search would be difficult or futile. E.g., Farmers
       Mut. Ins. Co., 992 N.E.2d at 756 (holding that this Court “could not agree that noncompliance . . . may be
       excused if it is later determined that such a search would have been fruitless”).
       6
         We note that the fact that Trust 4340 did not keep its changes of address updated with the Auditor is
       irrelevant to the Auditor’s exercise of constitutional duties. See Farmers Mut. Ins. Co., 992 N.E.2d at 758-59
       (noting that the Jones Court “rejected any suggestion that a landowner’s failure to comply with a statutory
       obligation to keep his address updated forfeited his right to constitutionally sufficient notice” and holding
       that “a landowner’s failure to provide the auditor’s office with a correct mailing address [cannot] excuse[] the
       auditor’s failure to carry out his duties”).
       7
         We need not address Trust 4340’s other arguments. But we note that we have significant concerns about
       the substantive content of the notice. Specifically, the notice provided neither a street address—which is not
       surprising, given that the land was undeveloped and had no address—or a common description of the

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019                                 Page 14 of 15
[27]   The judgment of the trial court is reversed and remanded for further

       proceedings.

       May, J., and Tavitas, J., concur.

       Property. We question whether this notice complied with Indiana Code section 6-1.1-24-4(b)(2), which
       requires that a tax sale notice must contain either a street address or a common description of the property.

       Court of Appeals of Indiana | Opinion 18A-MI-2150 | July 30, 2019                                  Page 15 of 15