Date: 10-07-2008

Case Style: Dolla Garcia v. Ted Parks, LLC, et al.

Case Number: 2008 OK 90

Judge: Kauger

Court: Supreme Court of Oklahoma on appeal from the District Court of Oklahoma County

Plaintiff's Attorney: Jennifer Jones, Jim Kelley, Oklahoma City, Oklahoma

Defendant's Attorney: Jeff Ludlam, Oklahoma City, Oklahoma

Description: ¶1 This cause concerns a dispute over title to a home owned since March 12, 1981, by the appellant, Dolla Garcia, also known as Dolla Moore (landowner). The appellee, Ted Parks, Inc. (Parks) asserts an interest in the property by virtue of his Certificate of Tax Deed. The legitimacy of Park's interest in the property is contingent on: 1) whether the Oklahoma County Treasurer's October 6, 2003, tax sale and the issuance of the September 6, 2007, Certificate of Tax Deed complied with the constitutional and statutory procedures authorizing the sale of real property for delinquent taxes; and 2) whether, under the facts of this cause, the landowner should have been allowed either exemption or redemption.

¶2 We hold that: 1) due process requires that the landowner be given actual notice of the sale, otherwise the sale is void; 2) the notice requirements for issuing the tax deed were not met, and the tax deed is void; and 3) because the landowner is legally disabled, she is entitled to redeem the property.

FACTS

¶3 In 2002, the landowner neglected to pay the ad valorem taxes on her home located in southeast Oklahoma City, Oklahoma. On October 6, 2003, the county treasurer placed the property for bid at public auction, and it was purchased by Heartwood 88, Inc. That same day, Heartwood assigned its interest to Parks after Parks paid the delinquent taxes for 2002, totaling $509.28.1 It appears Parks also subsequently paid the 2003 and 2004 ad valorem taxes on the property of $449.95 and $470.06.

¶4 In March of 2002, the landowner sought, but was denied, disability insurance benefits from the Social Security Administration. The record indicates that the onset of her disability began in 2001, and it initially consisted of degenerative back impairments of the cervical and lumbar discs, affective mood disorder, and a tear of her rotator cuff. The nature of the landowner's physical and mental condition continued to decline over the next several years, and it grew to include chronic neck and back pain, anger problems, emotional disorders including anxiety and depression, neck surgery, pain and muscle spasms, memory and concentration problems, knee problems including knee surgery, and shoulder and arm problems. She has undergone many different medical treatments, several surgeries, psychotherapy, and several hospitalizations. In addition to her physical decline, she became depressed, suicidal, and socially withdrawn.

¶5 On May 10, 2006, Parks filed an Application for a Tax Deed to the landowner's home. Finally, on May 26, 2006, after another hearing from the Social Security Administration, an administrative law judge determined that the landowner had in fact been disabled under the Social Security Act since March of 2002 and that she qualified for benefits. The record is unclear as to when, but at some point after she was determined totally disabled by the Social Security Administration, she started receiving a monthly check of $1,226.00.

¶6 The landowner was again admitted to the hospital on June 28, 2006. A few days later, on July 4, 2006, Johnny Moore, the landowner's son (son) who lived in Tulsa, Oklahoma, was in town to visit his mother. While he was dropping off his belongings at his mother's house for an overnight stay, a process server appeared at the house. Even though he told the process server that he did not reside at the home, the process server handed him a "Notice of Application for Tax Deed." According to the process server, the son stated that he did reside at the home. Regardless, the son, without reading the paperwork, left it on the kitchen table for his mother to find.

¶7 The landowner was released from the hospital on July 9, 2006, and allegedly she did not discover the "Notice" until late July. On July 28, 2006, the landowner signed an application for exemption from tax sale stating that: 1) she was the record owner of the disputed property; 2) she was 65 years old or older or is totally disabled; 3) the fair market value of the property does not exceed $125,000.00; and 4) her gross household income had been $300.00 monthly or approximately $4,300.00 annually (she does not mention whether she was also receiving the additional social security benefits at this time). On September 7, 2006, the Oklahoma County Treasurer issued a Certificate of Tax Deed for the disputed property to Parks. The deed was recorded on September 8, 2006.

¶8 On December 11, 2006, the landowner filed a Petition to Set Aside Tax Deed and to Quiet Title. She sought to clear her title of the cloud the tax deed presented on her property. She alleged that: 1) the purported tax deed was void because she was not given sufficient notice of the Application for Tax Deed; and 2) she was entitled to redemption of any alleged past-due tax assessments. The landowner tendered $2,210.78, the amount of taxes, penalties, costs and interest which she believed to be due as of March 6, 2006, to the county.

¶9 The trial court ignored the existence of disputed fact issues regarding whether the son lived with his mother, as the process server claimed, or whether he lived in Tulsa, as he and the landowner claimed. It granted summary judgment in favor of Parks and against the landowner on June 22, 2007.

¶10 Because the landowner suffered from a mental condition which severely limited her ability to manage her financial affairs, Wilmer Louis Garcia, her ex-husband, was appointed her limited guardian on July 31, 2007. She filed a Motion for New Trial/Reconsideration on August 20, 2007, arguing that: 1) notice of the tax deed application was improperly served and inadequate; and 2) new evidence had come to light regarding the July 31, 2007, guardianship appointment over her because of a mental condition and a determination of disability by the Social Security Administration in May of 2006, that declared her disabled since March 5, 2002. The trial court denied the motion for new trial, and the landowner appealed. The Court of Civil Appeals affirmed, and we granted certiorari on June 16, 2008.

I. ¶11 DUE PROCESS REQUIRES THAT THE LANDOWNER BE GIVEN ACTUAL NOTICE OF THE SALE. OTHERWISE, THE SALE IS VOID.

¶12 It is unclear from the record whether the initial tax sale was valid. Delinquent taxes owed on real property are considered a lien upon the property for seven years from the date they are due and payable.2 The procedures for collecting delinquent ad valorem taxes are set forth in the Oklahoma Tax Code, 68 O.S. 2001 §§ 3101 et seq. Pursuant to 68 O.S. Supp. 2007 §3105, a county treasurer may sell real property located within the county to pay delinquent taxes.3 However, before a tax sale is held, notice to the landowner is required. Title 68 O.S. 2001 §3106 requires the county to publish notice of the sale of real property for delinquent taxes in a newspaper, and it also mandates actual notice to the record owner by certified mail.4 However, the statute also provides that failure to receive notice shall not invalidate the sale.5 The record does not disclose when or if the landowner was served actual notice that her property was going to be sold by the county assessor on October 6, 2003 -- the event that triggered this dispute.

¶13 This Court has long recognized that the statutory notice provisions for a tax sale are mandatory, and the absence of such notice nullifies the sale of the property.6 Recently, in Southwestern Commercial Capital, Inc. v. Cornett Packing Co., 2000 OK 19, ¶16, 997 P.2d 849, when discussing the due process requirement of notice of a tax sale to interested parties, we noted that:

It is a fundamental tenet of constitutional law that one may not be deprived of a valuable property interest without first giving notice 'reasonably calculated under all circumstances, to apprise interested parties of the pendency of the action and afford them an opportunity to present their objections. . . . It would be idle to pretend that publication alone. . .is a reliable means of acquainting interested parties of the fact that their rights are before the courts.' Mullane v. Central Hanover Trust Co., 339 U.S. 306, 70 S.Ct. 652, 94 L.Ed 865 (1950). Notice by publication will not bind a party who, like the mortgagee here, is readily identifiable.

¶14 In Wells Fargo Credit Corp. v. Ziegler, 1989 OK 113, ¶6, 780 P.2d 703, the county treasurer failed to give a mortgagee actual notice of a resale of a tax deed. The Court held that certified mail notice which was returned unclaimed was constitutionally insufficient to give the county treasurer the right to conduct a tax resale which would abrogate the mortgagee's interest. In Luster v. Bank of Chelsea, 1986 OK 74, ¶18, 730 P.2d 506, the Court held that a resale tax deed was void because the county treasurer unconstitutionally exercised jurisdiction over the original sale and resale upon which the resale tax deed was based, where the treasurer had not properly mailed notice to the actual owner of the property.

¶15 Clearly, to the extent that the statute implies that the failure to give actual notice to a record owner who was living on the property and whose whereabouts were known does not affect the validity of the tax sale, it conflicts with constitutionally protected due process notice requirements.7 A constitutionally deficient tax sale is void and ineffective, and failure to comply with the notice requirements deprives the county treasurer of jurisdiction.8

II. ¶16 THE NOTICE REQUIREMENTS FOR ISSUING THE TAX DEED WERE CLEARLY NOT MET. CONSEQUENTLY, THE TAX DEED IS ALSO VOID.

¶17 When a tax sale is held by the county treasurer, the first person to pay the delinquent taxes in full with accompanying costs is issued a certificate of tax sale.9 After that sale, the purchaser must wait two years for the record owner to pay the back taxes, interest, and costs. If the owner does not do so within that period, the holder of the certificate can exchange the certificate of tax sale for a deed to the land.10 Pursuant to 68 O.S. Supp. 2002 §3118, to obtain the deed, the holder of the certificate must serve the record owner with notice of the application for the tax deed. Thereafter, the record owner has 60 days to redeem the property.11

¶18 In matters pertaining to tax sales, statutes prescribing the manner of service of notice and the issuance of tax deeds are mandatory.12 The court may set aside a tax deed if the certificate holder fails to comply with the statutory notice requirements.13 The fact that a property owner has actual knowledge of a proceeding to obtain a tax deed does not relieve the person seeking the deed from complying with the applicable notice statutes.14 A tax deed issued under a defective notice is void.15

¶19 In Shamblin v. Beasley, 1998 OK 88, 967 P.2d 1200, the Court addressed whether service of pre-sale notice on the wife-owner by delivery to her husband satisfied the fundamental due process standards. In discussing due process, the Court noted that when it is alleged that the statutory requirements for service were not strictly complied with, the court must determine whether the departure offended the standards of due process and deprived the party of a fundamental right to notice. In Shamblin, it was the totality of circumstances - not the particular norms of statutory requirements - that dictated the quality of service necessary to safeguard an individual's property interest at stake. The constitutional norms required for due process are not dependent on where service was effected on another. Rather, the fundamental-law test is based on the reasonable probability that the person to whom service is directed will receive actual notice from one who accepted service for another as the latter's lawful designee.

¶20 The factors we considered in Shamblin to conclude that service on the husband was effective were such things as: 1) existence of spousal status; 2) joint ownership of the property in question; 3) the legal impact of the proceedings for tax resale of their owners' interests; 4) the fact of cohabitation and maintaining a joint residence in a common dwelling; and 5) the homestead status of the property. Our holding in Shamblin was expressly "not to be enlarged by reading into it the principle that the wife would be bound by service delivered to the husband in a context other than the circumstances presented by this case."

¶21 Obviously, Shamblin is not controlling. Here, service was made on the son who merely stopped by his mother's property on the way to visit her in the hospital. Even if applied in the context of a mother/son relationship rather than a spousal relationship, not one Shamblin factor exists. Nor does applying the "totality of the circumstances" test result in a "reasonable probability" that the landowner would have received actual notice by serving the son while his mother was hospitalized. Service was clearly ineffective and contrary to 12 O.S. 2001 §2004.16

¶22 The landowner does admit discovering the notice on her kitchen table by the end of July 2006. Were we to consider this actual notice, the landowner still should have been given 60 days after receiving it to redeem the property -- until the end of September. However, the tax deed was issued on September 7, 2006, and filed the next day. It was void because it was issued before the landowner's opportunity of redemption, pursuant to 68 O.S. Supp. §3118, had expired.17

III. ¶23 THE LANDOWNER IS LEGALLY DISABLED AND IS ENTITLED TO REDEEM THE PROPERTY.

¶24 There are cumulative reasons which require vacation of the tax deed. Not only was notice defective, the landowner qualified for a redeemption. The version of 68 O.S. Supp. 2002 §3105 in effect when the tax sale was held provided an exemption from the sale of property when the following conditions were met:

1) the property was a single-family dwelling;

2) the individual residing on the property was 65 or older;

3) the real property is not being used as rental property;

4) the income of the individual living on the property does not exceed poverty guidelines; and

5) the fair market value of the property does not exceed $125,000.18

¶25 The statute places the duty on the landowner to apply for an exemption no later than 60 days prior to the date the property is scheduled to be sold.19 On the date of the sale, the landowner did not qualify for the exemption.20 However, on November 1, 2003, just a few weeks after the tax sale was held, a new version of this statute went into effect. This 2003 version allowed persons who have been classified as "totally disabled" to also qualify for the exemption from sale.21 The statute defined "totally disabled" as:

C. As used in this section, a person who is 'totally disabled' means a person who is unable to engage in any substantial gainful activity by reason of a medically determined physical or mental impairment which can be expected to last for a continuous period of twelve (12) months or more. Proof of disability may be established by certification by an agency of state government, an insurance company, or as may be required by the county treasurer. Eligibility to receive disability benefits pursuant to a total disability under the Federal Social Security Act shall constitute proof of disability for purposes of this section.

By the time this version of the statute became effective, the landowner could have qualified as a disabled person under the statute, but the tax sale had already occurred. Here, we do not apply the after-enacted statute because it was not in effect at the time of the sale. Consequently, the question then becomes whether she is entitled to redeem the property.

¶26 Oklahoma law favors redemption. In Sherrill v. Deisenroth, 1975 OK 136, ¶22, ¶24, 541 P.2d 862, the Court addressed the right of redemption by a landowner and the policy behind it. The Court noted that:

. . .The taking of a taxpayer's property for taxes is an involuntary exaction by the state, and the tax-gathering authorities must stay strictly within the provisions of the law authorizing the collection of such taxes or taking of such property. Nothing is to be indulged in their favor, or in favor of grantees of property sold for taxes and undertaken to be conveyed by the tax-gathering authorities. This Court has recognized that statutory provisions relating to redemption from tax sale must be construed liberally in favor of redemption. . . We conclude that the removal of a citizen from his land by reason of tax delinquency is repugnant and offends the innate sense of justice in each citizen. The Legislature, recognizing this, established clear unequivocable guidelines in the disenfranchising process with liberal redemption rights allowed to the landowner. . . . Public policy favors redemption by payment of all delinquent taxes prior to the execution of a deed by the county treasurer.

In other words, every opportunity is to be afforded persons entitled to redeem real estate from a lien resulting from a tax sale prior to the execution of a tax deed by the country treasurer. Until a tax deed, valid on its face, has been issued and delivered, the landowner has the right to redeem from the tax sale or resale.22

¶27 Here, the landowner attempted to file an exemption from sale nearly three years after the sale had occurred, and she attempted to redeem the property when she filed her petition in district court. Although it might appear that the landowner's initial attempt at redemption was untimely,23 §3113 of title 68 provides an exception to the general rule that redemption may occur anytime before execution of a deed by the county treasurer. The exception is relevant here. It allows landowners who are minors, or incapacitated under a disability to "redeem from taxes any property . . . within one year after the expiration of such disability."24

¶28 In Shamblin v. Beasley, 1998 OK 88, ¶8, 967 P.2d 1200, a case involving an ejectment of spousal possessors from land, we recognized the rule that a resale tax deed, facially meeting the basic statutory prerequisites, cuts off the redemption opportunity for those affected parties who are not then under a legal disability. In Sherrill v. Deisenroth, supra, we also noted that the right of redemption of a landowner in a tax resale, not suffering from a statutory disability, ceases upon the execution of a valid tax deed by the county treasurer.

¶29 In Ray v. Williams, 1954 OK 339, ¶0, 278 P.2d 550, the Court addressed a predecessor of §3113 as applied to minors. It recognized that the statute clearly provides that minors shall have the right to redeem any land owned by them or in which they have a legal or equitable interest from the lien resulting from tax sale within one year after expiration of their disability. The Court stated that such provisions for redemption by minors and other persons under disability are incidental to the main purpose of the act. It also noted that this right of redemption may not be cut off by the court, nor may the property owner be forced to redeem prior to the expiration of the time given by statute. The same rationale has also been applied to an incompetent person [Beane v. Kinney, 1945 OK 161, ¶6, 158 P.2d 1009], a physically and mentally incapacitated person [Brown v. Chaddick, 1946 OK 243, ¶2, 172 P.2d 996], and an insane person [Parks v. Clark, 1943 OK 132, ¶0, 136 P.2d 199].

¶30 Here, by May 26, 2006, the Social Security Administration had determined that the landowner had been disabled under the Federal Social Security Act since March 5, 2002.25 Under the terms of §3105, the landowner has now been under a legal disability since March of 2002. Pursuant to §3113, she has the statutory right to redeem her property within one year after the expiration of her disability. Title 68 O.S. 2001 §314026 delineates the procedure to cancel a tax deed, and it allows the landowner to show that she was entitled to redemption. Here, her time limit to redeem has not begun to run. The trial court clearly erred in not allowing her to redeem her property under the facts presented.

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http://www.oscn.net/applications/oscn/deliverdocument.asp?cite=2008+OK+90

Outcome: ¶31 The purpose of the statutory procedure for collecting delinquent taxes is twofold. It serves to provide an opportunity for the county treasurer to collect taxes which are due. It also serves to protect property owners and provide every opportunity possible for them to redeem their property before it is taken. Additional measures are in place for landowners who are incapacitated or under a disability because the statutory procedures were not intended as a way to manipulate elderly or disabled people out of their homes. Under the facts of this cause, a mentally and physically disabled landowner is ready, willing, and able to redeem her property and pay the delinquent taxes, but the "process" has been sidestepped so that she can be removed from her property. The cause is remanded to the trial court for further proceedings consistent with our pronouncement.

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