Foreclosures of Liens for Delinquent Land Taxes Ex Rel. Collector of Revenue v. Bhatti

334 S.W.3d 444, 2011 WL 797440

• Court: Supreme Court of Missouri
• Decided: March 1, 2011
• Docket: SC 90732
• Status: Published

Opinions

MARY R. RUSSELL, Judge.

The Collector of Revenue of the City of St. Louis filed a tax lien foreclosure suit under the Municipal Land Reutilization Law¹ (MLRL) against a property owner who failed to pay real estate taxes for three years. After a judgment of foreclosure, the real estate was sold at a tax sale. The purchaser sought confirmation of the tax sale, which the circuit court granted. The owner, who had been delinquent on his taxes, filed a motion to set aside the tax sale and the confirmation judgment because he alleged that he did not receive notice of either.

The circuit court overruled the motion, and the owner appeals to this Court, arguing that the MLRL violated his due process rights because he did not receive notice of either the tax sale or the confirmation hearing. Under Jones v. Flowers, 547 U.S. 220, 126 S.Ct. 1708, 164 L.Ed.2d 415 (2006), if a government entity knows or has reason to know that a notice was ineffective, then it must take reasonable, additional steps to notify the owner of the potential taking of the property. Because the owner failed to present evidence that the sheriff knew or should have known that the notice of the tax sale was ineffective, the sheriff was not required to take any additional steps to notify the owner of the potential taking of the property. The circuit court’s judgment is affirmed.

I. Background

Mohammad Bhatti (Owner) failed to pay real estate taxes for 2005, 2006, and 2007 on a house he owned in St. Louis. The collector proceeded against him under the MLRL. To satisfy the tax lien attached to property, the MLRL requires three events to take place: (1) a judgment of foreclosure; (2) a tax sale; and (3) a judgment confirming the tax sale.

Pursuant to section 92.720, the collector filed a foreclosure action to enforce the tax lien. After Owner defaulted, the circuit court entered a judgment of foreclosure and directed the parcel to be sold to satisfy the tax lien. In accordance with section 92.810, the Sheriff of the City of St. Louis sent Owner notice of the pending tax sale via first-class mail to his last-known address, which was the address of the parcel being foreclosed and was the address provided by Owner when he acquired title. The parcel was sold at a sheriffs tax sale to Lewis Mitchell Company (Purchaser) for $7,600. When Owner failed to redeem the property prior to the tax sale, he was “barred and forever foreclosed of all his right, title and interest” to the parcel. Section 92.750. Purchaser, pursuant to section 92.840, filed a motion to confirm the sale with the circuit court. Prior to the confirmation hearing, Purchaser sent Owner notice of the hearing to the same address used by the sheriff. The circuit court, following the mandate in section 92.840, found that the purchase price was adequate consideration for the parcel and confirmed the sale.

Five months later, Owner filed a motion to set aside the tax sale and the confirmation judgment. Owner made no objection about not receiving notice of the foreclosure suit or judgment. Instead, he claimed error in not receiving notice of the tax sale and the confirmation hearing, arguing his constitutional right to due process was violated. The circuit court held an evidentiary hearing on his motion. A real estate agent testified that she was the agent for Owner’s parcel and that there was a sign in the front yard indicating that it was for sale. Owner testified that he did not live at the property, but because he was renovating the house, he was there frequently.² He never notified the assessor of any change of address. Owner also testified that he never received a tax bill for the parcel or a notice of the sheriffs tax sale.³ No other evidence regarding the notice was presented.

The circuit court overruled the motion to set aside the confirmation judgment and the tax sale. The circuit court deemed Owner’s testimony that he never received notice credible, but it found that the notices were sent to the address in the “records of the Assessor” as provided by Owner. The circuit court denied Owner relief pursuant to Jones v. Flowers, because he failed to present evidence that the tax sale notice was returned indicating that the sheriff knew or had reason to know that the notice was ineffective.

Owner filed a motion for a new trial, claiming newly discovered evidence. He attached four exhibits to the motion. Three exhibits were envelopes that were sent to the parcel’s address after the tax sale. All three envelopes were returned undelivered. The fourth exhibit was an affidavit from a mail carrier that stated that no mail was delivered to the parcel’s address because it was vacant. The circuit court overruled the motion because Owner failed to demonstrate that the evidence could not have been obtained' in time for trial by exercising due diligence.

Owner appeals to this Court, arguing that the circuit court erred in overruling his motion to set aside the tax sale and confirmation judgment. He claims that the notice provisions of the MLRL, as applied to him, violate his rights to due process.⁴ This Court has jurisdiction pursuant to article V, section 3 of the Missouri Constitution.

II. Standard of Review

The circuit court’s overruling of the motion to set aside the tax sale and confirmation judgment will be sustained unless there is no substantial evidence to support it or unless it is against the weight of the evidence, it erroneously declares the law, or it erroneously applies the law. Murphy v. Carron, 536 S.W.2d 30, 32 (Mo. banc 1976). This Court will reverse the judgment as against the weight of the evidence with caution and with a firm belief that the judgment is wrong. Id.

III. Owner Failed to Present Evidence Regarding Knowledge of the Ineffective Notice

Owner claims that, because he failed to receive notice of either the tax sale or the confirmation hearing, the application of the MLRL violates his constitutional due process rights.⁵ He contends that the sheriff had reasonable, additional options for notifying him of the pending tax sale.⁶ Owner’s argument relies on the requirements for constitutionally sufficient notice, as set forth in Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950), and Jones v. Flowers.

No person may be deprived of property without due process of law. U.S. CONST. amend. XIV; Mo. Const. art. I, sec. 10. “An elementary and fundamental requirement of due process in any proceeding which is to be accorded finality is 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.” Mullane, 339 U.S. at 314, 70 S.Ct. 652. In Jones v. Flowers, the United States Supreme Court recognized that the Mullane standard for constitutionally sufficient notice does not require that the property owner actually receive notice. 547 U.S. at 226, 126 S.Ct. 1708. A government entity must take reasonable, additional steps to notify the property owner if it knows or has reason to know that the notice was ineffective. Id. at 234, 126 S.Ct. 1708; see also Schlereth v. Hardy, 280 S.W.3d 47, 50 (Mb. banc 2009).

A. Notice of the Tax Sale

Owner offered no evidence at trial that the sheriffs notice was not reasonably calculated to apprise him of the tax sale or that the sheriff knew or should have known that the notice was ineffective. The address the sheriff used was the parcel’s address, which Owner provided in the recorded deed as the address for receiving real estate tax notices.⁷ See section 59.330. Despite that address being the address of the vacant home, Owner never corrected the address with officials.

The dissent cites Robinson v. Hanrahan, 409 U.S. 38, 93 S.Ct. 30, 34 L.Ed.2d 47 (1972), and Conseco Finance Servicing Corp. v. Missouri Department of Revenue, 195 S.W.3d 410 (Mo. banc 2006), for the proposition that first-class mail was constitutionally insufficient under the facts of those cases. Yet in both cases the government had knowledge that the notice was sent to a residence to which the person entitled to notice did not have access. In Robinson, the state knew that the person entitled to receive notice was incarcerated, 409 U.S. at 40, 93 S.Ct. 30, and in Conseco, the state knew that the manufactured home to which the notice had been sent was abandoned by the persons entitled to receive notice. 195 S.W.3d at 416. In contrast, here, there was no evidence that the sheriff had knowledge that Owner could not have received notice at the address to which notice was sent.⁸

Owner pleaded in his motion to set aside the tax sale and confirmation judgment that he did not receive notice of either. He also pleaded that there were reasonable, additional methods that the sheriff could have used to notify him of the pending tax sale. Owner proposed three additional methods: (1) the sheriff could have used the address Owner provided for the building permits he obtained from the city;⁹ (2) the sheriff could have driven by the property, which would have revealed that this property was for sale and that Owner could have been contacted through the real estate agent; or (3) the sheriff could have posted notice on the property.¹⁰

Without knowledge that the notice was not reasonably calculated under these circumstances to apprise Owner, the sheriff was not required to take any further steps to notify Owner. See Flowers, 547 U.S. at 234, 126 S.Ct. 1708. The dissent offers that “properties being foreclosed on may have a higher vacancy rate.” The authority of this speculation is an Indiana Law Review article about home mortgage foreclosures in Baltimore. There was no evidence in the record that real estate subject to tax lien foreclosures in St. Louis have a high vacancy rate.

The circuit court held an evidentia-ry hearing at which Owner testified that he did not receive notice of the tax sale in the mail or otherwise. There was no evidence presented at the evidentiary hearing as to whether the sheriff knew or had reason to know that the notice of the tax sale was ineffective. Despite his failure to present sufficient evidence to establish that the notice was constitutionally ineffective at the circuit court, Owner now argues on appeal that the legal file contains a document called the “Sheriffs Sale Register” (register), which reflects that the sheriffs notice of sale was “returned to sender.”

The register is marked as Exhibit A in the legal file, but there is no pleading, affidavit, or judgment to which it could logically be attached. . It appears in the legal file as an attachment to the judgment of foreclosure, which is chronologically impossible. The judgment of foreclosure was dated June 6, 2008, and this “orphan” document was dated nearly a year later. If this document belongs elsewhere in the legal file, it is not this Court’s responsibility to determine where. It is the appellant’s responsibility to prepare an accurate record on appeal, including the legal file, with the evidence necessary to support the appellant’s arguments. Rule 81.12; see also Wilkerson v. Prelutsky, 943 S.W.2d 643, 649 (Mo. banc 1997). Although Owner claims that the register indicates that the notice the sheriff sent to him was returned undelivered by the post office, he never offered that document into evidence at the hearing or asked the circuit court to take judicial notice of it.

Instead, Owner now argues on appeal that the register was already part of the evidence under section 92.765, which states:

Affidavits of publication of notice of foreclosure, and of posting, mailing, or other acts required by the provisions of sections 92.700 to 92.920 shall be filed in the office of the circuit clerk prior to the trial, and when so filed shall constitute part of the evidentiary documents in the foreclosure suit. Such affidavits shall be prima facie evidence of the performance of acts therein described, and may be so used in the trial of the suit, unless challenged by verified answer duly filed in the suit.

(emphasis added). This statute pertains to the foreclosure suit, which Owner did not contest. He challenges the notice for the tax sale and the confirmation hearing. Section 92.765, by its plain language, is inapplicable under the facts here.

Owner has failed to show that the register was part of the record in the circuit court’s proceeding on the motion to set aside the tax sale and the confirmation hearing. If Owner intended to rely on the document to prove that the sheriff knew or should have known that the notice of the tax sale was ineffective, he should have offered it into evidence at the evidentiary hearing or asked the circuit court to take judicial notice of it. The circuit court is not required to leaf through a file to determine what should be used as evidence when making its decision. Wampler v. Dir. of Revenue, 48 S.W.3d 32, 35 (Mo. banc 2001). The circuit court cannot be convicted of error based on evidence not in front of it but offered later on appeal.¹¹

The dissent confuses the issue in this case. The cost of notices sent by the statutorily required first-class mail is not relevant to the analysis of whether a due process violation occurred under Mullane or Flowers. The issue here is whether the sheriff knew or had reason to know that the notice he sent to Owner was ineffective, and if so, whether the sheriff took reasonable, additional steps to notify Owner of the potential taking of the property. Flowers, 547 U.S. at 234, 126 S.Ct. 1708. The circuit court found that, despite believing that Owner did not receive the notice, there was no due process violation as Owner failed to present evidence that the sheriff knew or should have known that the notice of the tax sale was ineffective. Under these facts, Flowers does not require the sheriff to take any additional steps to notify the owner.

B. Notice of the Confirmation Hearing

Further, Owner presented no evidence regarding the notice of the confirmation proceeding. He did nothing beyond merely alleging in his motion that he did not receive notice of the confirmation proceeding. At the evidentiary hearing, he did not testify regarding the notice of the confirmation hearing, and there also was no evidence demonstrating that Purchaser knew or should have known that the notice of the confirmation proceeding was ineffective. Allegations in pleadings must be proven at trial. Gen. Motors Corp. v. Fair Emp’t Practices Div., 574 S.W.2d 394, 400 (Mo. banc 1978).

IV. Conclusion

This Court regrets the result in this case. But Owner’s loss of his real estate is the result of his multiple acts of negligence. First, he was negligent in failing to pay his real estate taxes for three years. He cannot claim he did not know he owed taxes when he was current on real estate taxes on other property he owned in the City of St. Louis. Second, Owner provided an incorrect address for the purpose of notification of real estate taxes due, and he never updated his address during the preceding three years he was delinquent or filed a forwarding address with the post office. Third, when pursuing his constitutional rights in our court system, he failed to follow United States Supreme Court authority that requires him to show that the notice sent to him was not reasonably calculated to apprise him of the pendency of the action against him. Owner further neglected to present any evidence to the circuit court to prove that the sheriff knew or should have known that the notice sent was ineffective. Because of this lack of evidence, Owner did not prove that the MLRL, as applied to him, violated his right to due process.

Although this result may appear unfair, as Owner stands to lose real estate in which he has put substantial resources, neither the sheriff nor the courts can assume responsibility for Owner’s multiple mistakes. As much as the dissent would like to create a new record and rewrite Supreme Court precedent, this Court is compelled to consider the record before it and comply with the holdings of Mullane and Flowers. With hundreds of properties subject to tax lien foreclosure in the City of St. Louis, notions of due process and statutory law do not require the sheriff to take any further steps to find property owners, absent knowledge that notice was not received. Courts cannot impose new requirements when there has been no constitutional violation.

There is no legal basis to find the circuit court erred based on this record. The judgment is affirmed.

PRICE, C.J., BRECKENRIDGE and FISCHER, JJ., concur. WOLFF, J., dissents in separate opinion filed. TEITELMAN and STITH, JJ., concur in opinion of WOLFF, J.

1 . Sections 92.700 to 92.980. Unless otherwise noted, all statutory references are to RSMo 2000.

2 . Owner testified at the hearing that the renovations were extensive, including electrical wiring, plumbing, hardwood floors, a deck, and a fence. He claims that he invested substantial resources into renovating the house.

3 . There was no evidence in the record that Owner was a "relative newcomer to St. Louis,” as stated by the dissent. Owner was familiar with paying real estate taxes. He acknowledged that he received tax bills and was current on real estate taxes on other property he owned in St. Louis.

4 . Although this is an "as applied” challenge, notice by first-class mail has passed constitutional scrutiny in "facial” challenges. See Collector of Rev. of City of St. Louis v. Parcels of Land Encumbered with Delinquent Tax Liens, 585 S.W.2d 486, 488 (Mo. banc 1979) (considering a facial challenge and upholding the notice provisions of the MLRL); see also Mullane v. Central Hanover Bank & Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed. 865 (1950) (finding notice by publication inadequate and authorizing notice by first-class mail).

5 . At the circuit court, Owner also claimed that his right to redemption was violated.

6 . Owner’s motion contended that the collector was the entity from which he never received notice of the tax sale. The motion failed to recognize that section 92.810 mandates that the sheriff, not the collector, sends the notice. However, Owner’s brief more broadly argues that the City of St. Louis had the obligation to send notice of the tax sale. In this opinion, this Court will follow the clear language of section 92.810 and refer to the sheriff as the one obligated to give notice of a pending tax sale.

7 . Obviously, if an owner did not plan to live at the parcel, he would have listed a different address where he could receive mail.

8 . Despite the dissent's belief that it is "common knowledge that many such foreclosure properties are vacant,” the dissent fails to appreciate that in these current tough economic times, many property owners continue to reside in their homes as long as possible because they cannot afford to move and live elsewhere. Our statutes contemplate this situation and provide for unlawful detainer actions to remove these persons.

9 . It is unclear why the sheriff should use a different address from what Owner provided for real estate tax purposes. This logic would require the sheriff in future cases to disregard addresses as provided by owners for real estate tax purposes and search not only building permits but also search endlessly for different addresses. This approach is impracticable.

10 . The dissent also suggests personal service as an alternative form of service to avoid the hardship caused by ineffective first-class mail. Absent some constitutional guarantee being infringed, it is the responsibility of the legislature, not the courts, to afford such relief by providing alternative methods of service. Nelson v. City of New York, 352 U.S. 103, 111, 77 S.Ct. 195, 1 L.Ed.2d 171 (1956). Here, no constitutional guarantee was infringed.

11 . The dissent argues, without citing authority, that to meet the constitutional due process standard, the sheriff should maintain records detailing when notices are "returned to sender.” The sheriff maintained such a record, but it was not offered into evidence by Owner. Further, Owner does not challenge the notice sent by the collector.