Court Opinion

ID: 7361199
Source: CourtListenerOpinion
Date Created: 2022-07-27 17:02:04.76577+00
Date Added: 2024-06-11T16:20:36.441892
License: Public Domain

IN THE

    SUPREME COURT OF THE STATE OF ARIZONA
  4QTKIDZ, LLC; BLUE PALO SERVICING COMPANY, LLC; AND DANA H.
                 COOK FAMILY PARTNERSHIP, LTD.
                       Plaintiffs/Appellants,

                                    v.

    HNT HOLDINGS, LLC AND BETH FORD, PIMA COUNTY TREASURER,
                      Defendants/Appellees.

                           No. CV-21-0065-PR
                           Filed July 27, 2022

            Appeal from the Superior Court in Pima County
              Nos. C20192106, C20192012 and C20182065
             The Honorable Charles V. Harrington, Judge
                 The Honorable Paul E. Tang, Judge
                   REVERSED AND REMANDED

    Memorandum Decision of the Court of Appeals, Division Two
  Nos. 2-CA-CV 2019-0187, 2 CA-CV 2019-0188 and 2 CA-CV 2019-0190
                            (Consolidated)
                       Filed February 8, 2021
                              VACATED

COUNSEL:

Eric W. Kessler, Ryan E. Kessler, Eric Bryce Kessler (argued), Kessler Law
Group, Scottsdale, Attorneys for 4QTKIDZ, LLC, et al

John Maston O’Neal, Benjamin C. Nielsen (argued), Quarles & Brady LLP,
Phoenix, Attorneys for HNT Holdings, LLC

Laura Winsky Conover, Pima County Attorney, Kathryn Ore, Deputy
County Attorney, Tucson, Attorneys for Beth Ford, Pima County Treasurer

Ari Ramras, Ramras Legal, PLC, Phoenix, Attorneys for Amicus Curiae
Land Title Association of Arizona
                 4QTKIDZ, LLC v. HNT HOLDINGS, LLC
                        Opinion of the Court

Heather M. Hendrix, The Hendrix Law Office, P.L.L.C., Gilbert, Attorney
for Amici Curiae Barry C. Becker, Michael J. Doyle, Michael A. Fleishman,
Heather M. Hendrix, John J. Lohr, Jr., and Mark L. Manoil

CHIEF JUSTICE BRUTINEL authored the opinion of the Court, in which
VICE CHIEF JUSTICE TIMMER and JUSTICES BOLICK, LOPEZ, BEENE,
MONTGOMERY and KING joined.

CHIEF JUSTICE BRUTINEL, opinion of the Court:

¶1             Under A.R.S. § 42-18202, lienholders must notify a property
owner of their intent to foreclose before bringing an action to foreclose on
the property owner’s right to redeem the lien. We must decide whether
§ 42-18202’s pre-litigation-notice requirement is satisfied upon delivery to
the type of addresses specified in the statute, or whether a lienholder’s due
diligence to obtain service of the notice is always required. Compelled by
the statute’s text, context, and structure, we hold that delivery of a pre-
litigation notice to each of the three addresses referred to in subsections
(A)(1)(a)–(c) is sufficient, even if the lienholder has reason to believe the
property owner never received the notice.

                          I.     BACKGROUND

¶2            In 2005, HNT Holdings, LLC (“HNT”) purchased three
contiguous parcels of real property in Oro Valley. Property tax payments
on all three parcels became delinquent. The petitioners, Dana H. Cook
Family Partnership, Ltd. (“Cook”), Blue Palo Servicing Company, LLC
(“Blue Palo”), and 4QTKIDZ, LLC (“4QTKIDZ”) (collectively,
“Lienholders”) each purchased a tax lien on one of the parcels and later
sought to foreclose on the respective properties. Each Lienholder mailed a
notice of intent to foreclose to the physical address for its respective parcel
as well as to an address on Maverick Road, which was HNT’s address
according to the records of the county assessor and also the tax bill mailing
address according to the records of the county treasurer. All notices were
returned as undeliverable. After the statutorily mandated time, the
Lienholders filed complaints to foreclose on their tax liens and attempted
to serve the complaints on the HNT statutory agent, ultimately serving

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                  4QTKIDZ, LLC v. HNT HOLDINGS, LLC
                         Opinion of the Court

HNT through the Arizona Corporation Commission when initial attempts
at service proved unsuccessful.

¶3             Three separate trial court proceedings resulted in default
judgments against HNT, which subsequently moved to set the judgments
aside. One court consolidated the Cook and Blue Palo matters for purposes
of the hearing and granted HNT’s motions, finding the judgments “void for
lack of service under [Arizona] Rule [of Civil Procedure] 4.1” as well as
“exceptional additional circumstances” warranting relief because due
diligence could have resulted in actual service upon HNT. Another trial
court also granted HNT’s motion in the 4QTKIDZ matter, reasoning that
Jones v. Flowers, 547 U.S. 220 (2006), requires additional steps when notice
provided is known to be defective. In a consolidated appeal, the court of
appeals concluded that both methods of service under the statute require
notice sent to the owner, not a specific address, so that if a lienholder receives
the notice back as undeliverable without any additional effort to locate a
current address, notice is not sufficient. 4QTKIDZ, LLC v. HNT Holdings,
LLC, Nos. 2 CA-CV 2019-0187, 2 CA-CV 2019-0188, and 2 CA-CV 2019-0190
(Consolidated), 2021 WL 438848, at *3 ¶ 15 (Ariz. App. Feb. 8, 2021) (mem.
decision).

¶4           We granted review because this case presents a legal issue of
statewide importance. We have jurisdiction under article 6, section 5(3) of
the Arizona Constitution.

                             II.    DISCUSSION

¶5             We review issues of law, including statutory interpretation
and whether a judgment is void, de novo. State v. Holle, 240 Ariz. 300, 302
¶ 8 (2016); BYS Inc. v. Smoudi, 228 Ariz. 573, 578 ¶ 18 (App. 2012). When we
interpret statutes, we strive “to effectuate the legislature’s intent.” Welch v.
Cochise Cnty. Bd. of Supervisors, 251 Ariz. 519, 523 ¶ 11 (2021) (quoting
Stambaugh v. Killian, 242 Ariz. 508, 509 ¶ 7 (2017)).                 “Statutory
terms . . . must be considered in context.” Est. of Braden ex rel. Gabaldon v.
State, 228 Ariz. 323, 325 ¶ 8 (2011). “‘When the plain text of a statute is clear
and unambiguous,’ it controls unless an absurdity or constitutional
violation results.” Sell v. Gama, 231 Ariz. 323, 327 ¶ 16 (2013) (quoting State
v. Christian, 205 Ariz. 64, 66 ¶ 6 (2003)). “A cardinal principle of statutory
interpretation is to give meaning, if possible, to every word and provision
so that no word or provision is rendered superfluous.” Nicaise v. Sundaram,
245 Ariz. 566, 568 ¶ 11 (2019).

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                 4QTKIDZ, LLC v. HNT HOLDINGS, LLC
                        Opinion of the Court

                                      A.

¶6             When a property owner becomes delinquent on property
taxes, the state acquires a lien upon the property which it can then sell to a
private party who becomes a lienholder. A.R.S. §§ 42-1151, -18114; see
generally Title 42 Chapter 18 Article 3 (detailing process for sale of tax lien
for delinquent taxes). The lienholder may foreclose on the tax lien if certain
statutory requirements are met. A.R.S. § 42-18201. One such statutory
requirement is pre-litigation notice to the property owner. § 42-18202.
Failure to comply with the pre-litigation notice requirements set forth in
§ 42-18202(A) renders a subsequent default judgment void. See Advanced
Prop. Tax Liens, Inc. v. Sherman, 227 Ariz. 528, 532 ¶ 21 (App. 2011); see also
§ 42-18202(C) (“A court shall not enter any action to foreclose the right to
redeem under this article until the purchaser sends the notice required by
this section.”).

¶7            Section 42-182021 provides:

       A. At least thirty days before filing an action to foreclose the
       right to redeem under this article, but not more than one
       hundred eighty days before such an action is commenced or
       may be commenced under § 42-18101 the purchaser shall
       send notice of intent to file the foreclosure action by certified
       mail to:

       1. The property owner of record according to the records of
       the county recorder in the county in which the property is
       located or to all of the following:

1 The legislature has since amended (A)(1)(a) as follows: “(a) The property
owner, as determined by section 42–13051, at the property owner’s mailing
address according to the records of the county assessor in the county in
which the property is located as determined by section 42 13051.”
2022 Ariz. Sess. Laws ch. 17, § 1 (2nd Reg. Sess.). Our interpretation of § 42-
18202 is limited to the 2015 version of the statute. We note, however, that
the 2022 amendment appears to codify the interpretation we present in this
opinion.
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                 4QTKIDZ, LLC v. HNT HOLDINGS, LLC
                        Opinion of the Court

       (a) The property owner according to the records of the county
       assessor in the county in which the property is located as
       determined by § 42-13051.

       (b) The situs address of the property, if shown on the tax roll
       and if different from the owner’s address under
       subdivision (a) of this paragraph.

       (c) The tax bill mailing address according to the records of the
       county treasurer in the county in which the property is
       located, if that address is different from the addresses under
       subdivisions (a) and (b) of this paragraph.

By its terms, § 42-18202 delineates two distinct methods of satisfying the
pre-litigation notice requirement. The first method, as expressed in
subsection (A)(1), involves sending the notice to the property owner of
record according to the records of the county recorder. The second method,
as expressed in subsections (A)(1)(a)–(c), involves sending the notice to the
owner according to the records of the county assessor, as well as to two
additional addresses.

¶8           Here, we determine what is required of lienholders in
providing valid notice under the second method, (A)(1)(a)–(c). While the
procedure for the first method is not before us, understanding the first
method provides a framework for understanding the second.

¶9             In Sherman, the court of appeals concluded that the first
method “requires more” than just mailing the notice to the address found
in the county recorder’s records, especially if the notice is returned as
undeliverable. 227 Ariz. at 532 ¶ 18. Sherman concluded that such notice
must be provided to the property owner and not simply sent to the address
of record. Id. at 531–32 ¶¶ 15–16. That is, if a lienholder sends notice under
the first method, the lienholder should be reasonably certain that the notice
will be delivered to the owner. See id. at 532 ¶ 20. But as Sherman noted,
“[c]ompliance with § 42-18202(A) does not guarantee actual notice.” Id.
¶ 21 n.4. The court further noted that “if the lien holder is not confident
that the available address for the owner of record is current, the lien holder
may prefer to follow the more extensive notice procedure set forth in
subparagraphs 42-18202(A)(1)(a)–(c)” (the second method) because that
method can be “reasonably satisfied and objectively proven.” Id. ¶¶ 19–20.

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                 4QTKIDZ, LLC v. HNT HOLDINGS, LLC
                        Opinion of the Court

¶10           This case asks us to decide whether this “more extensive
notice procedure,” prescribed by the second method, also requires some
additional effort to ensure a higher likelihood of the owner receiving notice.
We conclude it does not. Although the word “address” is absent in
subsection (A)(1)(a) in the 2015 version of the statute relevant here, (A)(1)(b)
and (c) require lienholders to send the notice to the specified addresses only
if the addresses differ from the owner’s address under subdivision (A)(1)(a).
This demonstrates the legislative intent that (A)(1)(a) is referring to the
address of “[t]he property owner according to the records of the county
assessor,” rather than the property owner. Therefore, Sherman’s due
diligence requirement does not apply.

¶11           The context and structure of the statute confirm our reading
of subsections (A)(1)(a)–(c). By creating two separate avenues for
delivering notice, the legislature intended the second method to require
something different from the first. The first method, per Sherman, is less
likely to result in actual notice to the owner. See 227 Ariz. at 532 ¶ 16.
Consequently, the first method requires additional effort to ensure the
owner has a higher likelihood of actually receiving notice. Id. ¶ 18. The
court of appeals here interpreted one of the three steps of the second
method to mean the same thing as the first method, 4QTKIDZ, LLC, 2021
WL 438848, at *3 ¶ 15, rendering the second method superfluous or
requiring an onerous and purposeless service on the two additional
addresses in (b) and (c).

¶12           Our reading is also supported by the statute’s designation of
different county agencies under the two approaches, which further
suggests that the first method is less likely to result in notice to the owner.
The two methods are based on information obtained from different
agencies with varying degrees of likelihood of having reliable contact
information for property owners. The first method requires a lienholder to
send the notice to the “property owner of record according to the records
of the county recorder,” whereas the first step of the second method
requires a lienholder to send the notice to the “property owner according
to the records of the county assessor.”2 § 42-18202(A)(1), (A)(1)(a).

2 The additional phrase “of record” in subsection (A)(1) provides yet
another textual clue indicating these provisions should have differing
meanings.
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                  4QTKIDZ, LLC v. HNT HOLDINGS, LLC
                         Opinion of the Court

¶13             The recorder’s office maintains public records and
documents, such as land transactions, but is not responsible for ensuring
the records reflect the current owner of a parcel of land. See What We Do,
Pima Cnty. Recorder’s Off., https://www.recorder.pima.gov/WhatWeDo
(last visited July 21, 2022). The assessor’s office “is responsible for locating,
listing, and valuing all of the properties under its jurisdiction that are to be
listed on the assessment rolls.” Assessment Process, Pima Cnty. Assessor,
https://www.asr.pima.gov/Assessment (last visited July 21, 2022).
Although there is no statutory requirement for an owner to update an
address, the Pima County Treasurer’s Office instructs taxpayers to change
their mailing address through the Pima County Assessor’s Address Change
Form because “the Pima County Assessor manages property owner mailing
addresses.” FAQs: How Do I Change My Mailing Address?, Pima Cnty.
Treasurer’s Off., https://www.to.pima.gov/home/#faq (last visited
July 21, 2022). Likewise, it is in the property owner’s best interest to keep
this information current for purposes of receiving assessment notices
pursuant to A.R.S. § 42-15101. Thus, the county assessor’s records are more
likely to list the current address of a property owner than the county
recorder’s records, which means the first method is less likely to generate
the owner’s current address. It makes sense that the legislature intended to
require some additional effort to obtain service for the method that is less
likely to result in actual notice.

¶14          The text, context, and structure of this statute indicate that
under the second method, nothing more is required of a lienholder than to
send the notice, by certified mail, to the addresses on record of (a) the
county assessor, (b) the situs address of the property, and (c) the tax bill
mailing address of the county treasurer.3 No additional effort to locate the
owner’s current address is necessary under the second method.4 Therefore,
the Lienholders’ pre-litigation notices to HNT were sufficient, and the
default judgments are not void on that ground.

3 Notices must be sent pursuant to (b) and (c) only if the addresses differ
from that in (a).
4 At least one court has relied on the incorrect reasoning of the court of

appeals below. See Advanced Prop. Tax Liens, Inc. v. Othon, 252 Ariz. 206, 215
¶ 26 (App. 2021). We disavow any cases that misinterpret the statute to
mean that “both notice provisions pinpoint the identity of the property
owner, not particular addresses to which notice must be sent.” E.g., id.
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                 4QTKIDZ, LLC v. HNT HOLDINGS, LLC
                        Opinion of the Court

                                      B.

¶15             The plain meaning of the statute aside, HNT argues that due
process mandates the court of appeals’ interpretation of § 42-18202. HNT
relies on Flowers, which held “that 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.” 547 U.S. at 225. But pre-litigation notice is
merely a preliminary notice to alert tax delinquent landowners of a tax
lienholder’s intent to foreclose. Even absent § 42-18202’s mandate,
lienholders must obtain sufficient service of process under Rule 4.1 to bring
property owners to court. Ariz. R. Civ. P. 4.1; see Roberts v. Robert, 215 Ariz.
176, 180 ¶¶ 16, 18 (App. 2007).5 That is, § 42-18202 adds an additional tier
of due process not required by Flowers. Moreover, when a private party
purchases a tax lien, the pre-litigation notice stage of foreclosure does not
involve state action. See State v. Sharp, 193 Ariz. 414, 421 ¶ 19 (1999)
(“[P]rotections contemplated by the Fourteenth Amendment, and by
incorporation of the Fifth Amendment, apply only to state actors, not to
private parties.”). Consequently, Flowers is inapplicable here.

                           III.   CONCLUSION

¶16           The Lienholders’ efforts to provide notice to HNT complied
with the second method of notice under § 42-18202. They were not required
to take any other action to provide notice of their intent to foreclose.
Accordingly, we vacate the court of appeals’ decision and remand for that
court to determine whether HNT received proper service of process of the
foreclosure complaint under Rule 4.1.

5Though HNT challenges the sufficiency of service of process, and at least
one of the trial courts set aside the judgment on this ground, this issue is
not before this Court.
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